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Skullcandy had Best Buy and Target knocking at its door, wanting to sell its headphones, geared to the trendy, extreme sports crowd.

Super Sailmakers had grown to two locations and was selling sails not only in the U.S. but in Europe and the Caribbean.

Small businesses like these are
driving ERP spending in a down economy. Investment in ERP software by small and medium-sized businesses (SMBs) is exploding, according to a recent report by Boston-based AMR Research, but small companies -- those with less than $250 million in revenue -- are leading the charge. Revenue from small companies grew by 31% this year, the report says.

ERP purchases by SMBs will help the ERP market reach $38.2 billion this year and grow to $55.9 billion in the next five years, according to the report.

In trying to decide on an ERP system, both companies looked to similar vendors, including SAP, NetSuite and Microsoft Dynamics. Park City, Utah-based Skullcandy chose Business ByDesign, SAP's Software as a Service (SaaS) ERP geared to SMBs. Fort Lauderdale, Fla.-based Super Sailmakers ended up going with SAP's on-premise ERP software for small businesses, Business One.

As a young company with no IT department and only four or five people who had ever worked with ERP software, Skullcandy didn't want to spend money to grow an in-house IT department, or lose productivity by sending people away for ERP training.

But the company was growing fast. When ERP implementation coordinator Beth Siron joined the company in April, there were 20 employees. Since then, the number has grown to 35.

Meanwhile, Siron said, financials consisted of Quickbooks and a lot of Excel spreadsheets.

Once Skullcandy executives decided SaaS ERP was the choice, they priced out Microsoft Dynamics NAV in a hosted situation, NetSuite, and Business ByDesign.

Learning about Business ByDesign was a challenge, however, partly because its ambitious rollout was scaled back in May -- SAP maintaining that it needed more work. So Siron went to SAPPHIRE, SAP's annual user conference, in May. There she spent two days talking with people on the Business ByDesign development team.

What ended up selling Skullcandy on SAP's SaaS ERP, she said, was the number of features it had out-of-the-box. It fit Skullcandy's human resources, warehouse management system, supply chain planning and production needs.

Also, it would be easy for employees who worked on the road to access the network. And the training is embedded in Business ByDesign, Siron said, so the company can craft it to users' needs.

Skullcandy's implementation began on June 10, and they expect to go live on September 15, she said. They are in the middle of migrating data into the production system right now.

"I was really skeptical," she said. "But we have hit every single milestone we have on the individual plan. It's crazy; crazy in a good way. SAP has been great for us. I know there [have] been a lot of concerns, but we have had so much attention from SAP."

Likewise, Super Sailmakers, with two locations, 15 employees and overseas sales, needed to consolidate management and operations on one platform, according to its vice president, Bob Meagher III.

"We had systems that worked very well when we were a smaller company," he said. "We had little integration between systems. As a result, we had duplicate data, errors were hard to catch and [the system] wasn't very accommodating about changes in the data."

Along with Business One, Super Sailmakers looked at Microsoft Dynamics, Sage AS 90 and NetSuite, Meagher said.

"We thought Business One and Microsoft Dynamics were both capable of meeting our needs," he said. "Business One seemed more proven and more flexible."

Having the data elsewhere was a concern for Super Sailmakers in considering an SaaS ERP, but that could have been overcome, Meagher said. He felt NetSuite didn't fit the company's needs because it doesn't have significant e-commerce, one of three applications NetSuite offers in addition to ERP and CRM.

On the financial side, the ability to customize dashboards, and the overall integration of the five or six different components of the business, sold executives there on Business One, Meagher said.

There were some hardware purchases they had to make, meaning the process is a little more costly than an SaaS ERP implementation up front, he said.

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